Court Rules Low-Income Residents Are Not a Protected Group

In Moody et al v. The Related Companies, LP (decided in August 2022), affordable housing tenants in an upscale New York City development filed a disparate impact claim under the Fair Housing Act (FHA). While most of the persons filing the suit were Black or Hispanic, the suit claimed a disparate impact based on their income status.

The U.S. District Court for the Southern District of New York denied the claim.

In this case, the plaintiffs had a different address for the same building as the market residents, had to use separate elevators from those used by the market-rate condominium owners, and lacked access to various amenities available to the market-rate owners.

The property in question is 16 Hudson Yards (“Hudson Yards”). The affordable component of the housing was built under the state’s 421-A program, which includes affordable rental units with market-rate units.

The plaintiffs alleged that affordable housing tenants were (1) segregated from spaces used by luxury condo owners in the same building; (2) required to use “poor doors” to access their apartments (i.e., the affordable units had a different street address than that used by the market-rate residents); and (3) were refused access to certain amenities available to the market owners (e.g., access to a swimming pool, playroom, and fitness center).

The affordable apartments are on lower floors than the market-rate units. The affordable and market residents have separate elevators, the lobby with the affordable address is smaller than the lobby with the Hudson Yards address, and the condos have in-unit washers and dryers, but the rental units do not.

In making its decision, the court ruled that to make a disparate impact claim, there must be factual allegations that would permit the court plausibly to infer that the plaintiffs were treated differently from similarly situated persons because of their membership in a protected class. However, the luxury condo owners were not similarly situated to affordable housing tenants, and the facts presented by the plaintiffs did not indicate that the disparate treatment was due to race, color, or national origin.

According to the court, the plaintiffs were unable to show that the challenged policy or practice had a disproportionately adverse effect on members of a protected class or that there was a robust causal link between the challenged policy and the adverse impact on members of a protected class.

The FHA does not provide protections based on economic status, even when economic status has substantial overlap with race. In this case, the plaintiffs had to show “prejudicial treatment of minorities over and above that which is the inevitable result of disparity in income.” According to the court, the plaintiffs were unable to do that.

Bottom Line: Socio-economic status is not a protected characteristic under the FHA. Unless a property’s policy of treating residents differently based on economic status directly contributes to racial segregation, courts are not likely to require the same living conditions for all income ranges. In this case, the court said that the plaintiffs failed to show that the affordable units were actually segregated. There was no evidence that the racial mix of the affordable units differed markedly from the luxury units. Thus, it was impossible for the court to infer that designing the building so all of the affordable units were on separate floors from luxury units resulted in the segregation of Black and Hispanic tenants.